Resale value - Will we see a disaster?

[xycrazy]

As we see these overly inflated prices on used cars and even new cars where dealer ask for thousands over MSRP I'm seriously wondering what it does mean for the resale value and appreciation down the road.

What do you guys think?

1. Which Trim Level (or even what specific features) will help to hold the most value?
2. Will the market continue to be crazy and given that fact the resale values in line with the craziness? Meaning we will still get more for our cars in a few years than usual? Or will we have to take very big hits, even more than usual?
3. Will the Diesel in particular hold its value and be stable? Or will the 6.2 be much more wanted since it's one of the last naturally aspirated big V8 engines?

Thoughts? Assumptions?

 

[Rocket Man]

When the chip shortage ends, all the vehicles bought at today’s inflated prices will be worth what they should have been worth, minus normal depreciation. So in other words, if you pay an inflated price, you’ll be upside down in a couple years. Way upside down. It’s not like housing where prices go up and don’t come back down. Real property increases in value over time, personal property does the opposite. There’s going to be a lot of folks that owe so much more on their loans than what their vehicles are worth that they’ll lose a ton of money if they sell.

 

[B520044]

With interest rates going up, inflation up and gas prices up; many people will be getting rid of (or not buying) big rigs for more modest haulers. So I predict that prices will fall hard (not quite yet, but 1-2 years). At least once the initial demand subside. Then reality sets in and people start to think about needs instead of wants..

I think the mid trims will hold their value, especially the ones that were able to squeeze out options during chip shortage. However, I also think the MFR's will try to keep dealer lots as lean as possible to prevent said falling prices....

I also think high gas prices are here to stay; at least for awhile. Many love the high gas prices; as a way to push us towards EV's. (my opinion; as much as I hate it)

 

[xycrazy]

With interest rates going up, inflation up and gas prices up; many people will be getting rid of (or not buying) big rigs for more modest haulers. So I predict that prices will fall hard (not quite yet, but 1-2 years). At least once the initial demand subside. Then reality sets in and people start to think about needs instead of wants..

I think the mid trims will hold their value, especially the ones that were able to squeeze out options during chip shortage. However, I also think the MFR's will try to keep dealer lots as lean as possible to prevent said falling prices....

I also think high gas prices are here to stay; at least for awhile. Many love the high gas prices; as a way to push us towards EV's. (my opinion; as much I a hate it)

Will never buy one of these EV garbage boxes! NEVER! I rather take the bus lol

 

[Seamus]

Its an easy answer. Any markup you paid is out the window and the normal market will reset. These markups are paid by people paying extra to get what they want. It does not mean the vehicle is worth more. It will not translate to value. This has been the norm for many years with markups...you pay it but the next guy won't.

 

[firsttimetahoe]

With interest rates going up, inflation up and gas prices up; many people will be getting rid of (or not buying) big rigs for more modest haulers.

If you can afford to buy a $60k full-size SUV, you really shouldn’t be worried about rising interest rates for financing or gas prices. If either of those are of any concern all of a sudden, then you’re over probably extending yourself financially. And for the people who build there car to the $70-80k+ trim level, you really really shouldn’t have to worry. Inflation will just make these more expensive over time - it’s a delayed effect. I’m sure the 2023 MSRPs will be even more.

And food for thought in regards to prices of the future - the new 2023 Seqouia is starting at $53k for the baseline model. Their top level trim is at like $69k. And that doesn’t include destination fees from where I read (tack only another 1500ish.

 

[firsttimetahoe]

As we see these overly inflated prices on used cars and even new cars where dealer ask for thousands over MSRP I'm seriously wondering what it does mean for the resale value and appreciation down the road.

What do you guys think?

1. Which Trim Level (or even what specific features) will help to hold the most value?
2. Will the market continue to be crazy and given that fact the resale values in line with the craziness? Meaning we will still get more for our cars in a few years than usual? Or will we have to take very big hits, even more than usual?
3. Will the Diesel in particular hold its value and be stable? Or will the 6.2 be much more wanted since it's one of the last naturally aspirated big V8 engines?

Thoughts? Assumptions?

I think you’re going to be fine honestly - these are pricey cars and full size SUVs are unique because people buy them knowing they’re costing more and they want a car that’s big - and outside of going up to the Escalade or Navigator route...the new Tahoes/suburbans and Yukons are close to a luxury type vehicle. Or at least I would consider them such.

I wouldn’t get used the used prices where newer-ish used cars are costing as much as new cars….but unless you throw on a ton of miles or don’t take care of it I think you’ll be in good shape

 

[B520044]

If you can afford to buy a $60k full-size SUV, you really shouldn’t be worried about rising interest rates for financing or gas prices. If either of those are of any concern all of a sudden, then you’re over probably extending yourself financially. And for the people who build there car to the $70-80k+ trim level, you really really shouldn’t have to worry. Inflation will just make these more expensive over time - it’s a delayed effect. I’m sure the 2023 MSRPs will be even more.

And food for thought in regards to prices of the future - the new 2023 Seqouia is starting at $53k for the baseline model. Their top level trim is at like $69k. And that doesn’t include destination fees from where I read (tack only another 1500ish.

Look at how the housing market works. People get into as much house a possible depending on interest rates. The same can be said for these SUVs, now that they've reached home price values... Low rates = someone paying more for full-size suv. High rates = people buy less expensive suv.

No question values will fall and the Sequoia entering the mix will assist in that fall for the GM twins. I like the Sequoia, but still love my AT4.

 

[Doubeleive]

yep and that's when I get to buy it at much more reasonable price, I never buy new I can't afford to loose 30-40k in 3-5 years, that thing would found in the woods burnt to a crisp.

 

[firsttimetahoe]

Look at how the housing market works. People get into as much house a possible depending on interest rates.

Apples and oranges, first of all. A normal person buying a car is a buying guaranteed depreciating asset over time. You really do not want to have to tap into extensive / long term financing to purchase a car you normally couldn’t afford, but the payment today looks nice because interest rates are low. By year 3, 4 and 5….your car payment will be the same as it was when your car was brand new, despite the fact the car may be worth half of its value.

Lets say I can buy a $70k Tahoe (rolling taxes, dealer fees everything into that price) at 0% financing for $0 down….for let’s say 84 months….you’re paying $833 a month for the next 7 years. By year 7 your car may only worth $35 grand. But your still paying $833 a month for that car. Which is 7 years old. Are you going to be happy that you’re still paying $833 a month 7 years later for a car that’s not worth $70k? Absolutely not.

Also - when it comes to home buying, you have to put down a downpayment, typically 20%. Sure a 3% vs 4% interest rate difference may cost you a few hundred dollars more a month over your mortgage for the next 30 years….but you still need the downpayment for a particular home value that you’re looking to afford. And need I say the obvious….I can buy a home and sell it for a profit because it may appreciate in value in 5 years. What standard car appreciates in value after 5 years.

 

[firsttimetahoe]

Its an easy answer. Any markup you paid is out the window and the normal market will reset. These markups are paid by people paying extra to get what they want. It does not mean the vehicle is worth more. It will not translate to value. This has been the norm for many years with markups...you pay it but the next guy won't.

They’re doing it because people buying these types of cars can afford it.

Mr & Mrs Smith, we don’t have the exact Denali you’re looking for. Honestly, we can build it for you but you may end up having to get rid of certain features you’d want with a shortage of parts. And you’ll have to wait as long as 6 months. But I do have a similar Denali coming in 2 weeks from now that has everything you’re looking for but the sunroof and instead of dark grey it’s black. Last thing to add, since inventory is low and we’re in an inflationary environment we’re charging market value which is $5k over MSRP. But you’ll get the car in 2 weeks. Or you can wait 6 months. I’ll let you guys discuss what you want to do while I go run to the printer

 

[R32driver]

Hopefully car prices crash, I want a newer Silverado but used prices are ridiculous these days. Fully expecting to take a massive hit on our ‘21 but we’ll keep it at least 10 years and it will still be low mileage so probably worth the higher end of things down the road but EVs will probably have decimated the ice market by then so who knows. Both my kids will be grown up by then so hopefully this is the last gigantic soccer mom ride we have to buy. Sign me up for a fast electric sportscar for my 50th birthday

 

[Stbentoak]

If you have to finance anything for 84 months, you are buying the wrong vehicle. Most people pay cash for these and don't really care about what it's worth in 6 years. They just get something else. This is not a lower income, 3 kids and a mortgage, Paycheck to Paycheck, I can't afford the gas, vehicle.....

 

[wjburken]

With vehicle prices being super high across the board, be it a new Yukon XL or a 10 year old used vehicle, to say that it’s only affecting a certain class of folks is not accurate in my opinion. The 72 & 84 month loans out there aren’t for the folks who can pay cash. It’s to get people to buy more vehicle than they would otherwise afford.

I do not believe the high prices we are seeing now on cars will have any real bearing on what the re-sale value is going to be in the future. The problem is going to show itself when folks have an accident in a few years when hopefully things have settled down and vehicle prices are more reasonable, and their policy pays based on the value of the vehicle at the time of the accident, not what they owe, and the payout doesn’t cover what is still owed. It happens today, I know, but I think it will be amplified with all this. This is regardless of economic class as it applies to what people are paying for used vehicles as well since some used vehicles are selling for as much, if not more than what they sold for new right now.

 

[Toomanyhobbies]

It is likely due to inflation and demand that the 2023's will be close to $5k more for the same truck. Inflation never goes the other way, meaning new truck prices are never going to go down, but they will level off. That combined with the low production numbers of 2021-22 trucks will keep prices high in the secondary market. Your dollars will be worth less, but your truck may be worth the same in dollars.

This is why owning hard assets is the best hedge for inflation...

 

[B520044]

Apples and oranges, first of all. A normal person buying a car is a buying guaranteed depreciating asset over time. You really do not want to have to tap into extensive / long term financing to purchase a car you normally couldn’t afford, but the payment today looks nice because interest rates are low. By year 3, 4 and 5….your car payment will be the same as it was when your car was brand new, despite the fact the car may be worth half of its value.

Lets say I can buy a $70k Tahoe (rolling taxes, dealer fees everything into that price) at 0% financing for $0 down….for let’s say 84 months….you’re paying $833 a month for the next 7 years. By year 7 your car may only worth $35 grand. But your still paying $833 a month for that car. Which is 7 years old. Are you going to be happy that you’re still paying $833 a month 7 years later for a car that’s not worth $70k? Absolutely not.

Also - when it comes to home buying, you have to put down a downpayment, typically 20%. Sure a 3% vs 4% interest rate difference may cost you a few hundred dollars more a month over your mortgage for the next 30 years….but you still need the downpayment for a particular home value that you’re looking to afford. And need I say the obvious….I can buy a home and sell it for a profit because it may appreciate in value in 5 years. What standard car appreciates in value after 5 years.

I totally agree. I was just adding that people will spend more for a vehicle when rates are lower. Meaning they likely considered a Tahoe/Yukon over an Explorer. Most people in the forums are rational people, however there are plenty of people in the masses that arent..

 

[B520044]

With vehicle prices being super high across the board, be it a new Yukon XL or a 10 year old used vehicle, to say that it’s only affecting a certain class of folks is not accurate in my opinion. The 72 & 84 month loans out there aren’t for the folks who can pay cash. It’s to get people to buy more vehicle than they would otherwise afford.

I do not believe the high prices we are seeing now on cars will have any real bearing on what the re-sale value is going to be in the future. The problem is going to show itself when folks have an accident in a few years when hopefully things have settled down and vehicle prices are more reasonable, and their policy pays based on the value of the vehicle at the time of the accident, not what they owe, and the payout doesn’t cover what is still owed. It happens today, I know, but I think it will be amplified with all this. This is regardless of economic class as it applies to what people are paying for used vehicles as well since some used vehicles are selling for as much, if not more than what they sold for new right now.

Good point.

 

[GoHeels]

If you have to finance anything for 84 months, you are buying the wrong vehicle. Most people pay cash for these and don't really care about what it's worth in 6 years. They just get something else. This is not a lower income, 3 kids and a mortgage, Paycheck to Paycheck, I can't afford the gas, vehicle.....

This sounds like Dave Ramsey talking with his "debt is bad" approach. No it isn't. People definitely overextend themselves by only considering the monthly payment. But saying financing is bad and most pay with cash is just wrong.

We financed (not for 84 months) but were given a rate of 2.02%. I'll take that rate all day every day for as long as its offered. I can invest my money elsewhere and make more money than I'm paying in interest.

 

[firsttimetahoe]

I never buy new I can't afford to loose 30-40k in 3-5 years

What’s the alternative? Leasing, where you’re paying anywhere from 40-60% of the MSRP of a car for 3 years and then you’re starting over? Not to mention - all of the hidden fees and baked in high interest rate on the loan they disguise?

If you have to finance anything for 84 months, you are buying the wrong vehicle. Most people pay cash for these

Ehhhh, not necessarily. If you can finance at close to zero % interest rates, you should do so and invest the principle.

 

[firsttimetahoe]

We financed (not for 84 months) but were given a rate of 2.02%. I'll take that rate all day every day for as long as its offered. I can invest my money elsewhere and make more money than I'm paying in interest.

Correct. And in 3-4 years when the time comes when your monthly finance payment is high relative you what your car value depreciates to you should pay off your loan